Debra J. Saunders
On Tuesday, House Budget Committee Chairman Paul Ryan gave a talk at Stanford's Hoover Institution on what should become the Republican Party's template behind its bid to "repeal and replace" Obamacare. Ryan cited the unintended consequences that employer-paid health care plans have delivered: "The system that shields us from the cost of services has actually left us paying much, much more."

On the same day, the Kaiser Family Foundation released a report that bolstered Ryan's argument. Over the past year, average annual cost for employer-sponsored health care plans rose 9 percent. Premiums have more than doubled since 2001. The average annual premium is now $15,073 per family -- and that doesn't include out-of-pocket payments.

With premiums rising higher than inflation, those numbers are biting into workers' paychecks. And there's little employers can do other than raise employee contributions from an average of $1,787 per family 10 years ago to $4,129 today.

The Affordable Care Act, signed by President Barack Obama, was supposed to rein in runaway health care costs. How's that going? Not as advertised. Even before the ACA takes full effect in 2014, today's mandates -- such as a requirement that employers offer coverage for adult children up to the age of 26 and that some plans provide free preventive care -- must be a factor in the cost spurt. The Kaiser report estimates that 2.3 million adult children were added to their parents' employer-sponsored plans because of the law.

Democrats complain about employers choosing to sit on their money and not hire. But their health care mandates serve as a tax on hiring workers.

It can only get worse. As providers consolidate, consumers' options decrease. Ryan told reporters after his talk that he sees a future in which, as with utilities, there are a mere "handful" of providers. That can't be good for consumers.

Ryan is probably the bravest Republican in Washington, because he trusts voters enough to lay out a GOP alternative. He crafted a budget, passed by the House, that would change Medicare into a "defined contribution" program in 2022. In essence, seniors would receive vouchers to purchase their own health plans.

The idea was to give seniors a stake in holding down health costs and the options necessary to do so. (Obamacare tries to control Medicare costs through the Independent Payment Advisory Board, which can set payments -- and arguably drive doctors out of Medicare.)

The Hoover talk brought the defined-contribution approach to employer-sponsored health care.

Under the status quo, many employees have neither the motivation nor the wherewithal to shop for the best care at the best price. The GOP plan would provide a $5,700 refundable tax credit to families, but workers would pay income tax on their employers' contributions.

Savings could result in one of two ways. Employers would have more flexibility in choosing coverage. Or employees could choose their own plan -- and take it with them if they wanted to start a business.

The result would be universal care but in a system, Ryan told me in an interview, that "reconnects the buyer and the seller." The downside: It could be more work for consumers. The upside: Employees actually might be able to pocket future raises instead of handing them over to an insurance company.


Debra J. Saunders


 
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